1 00:00:10,119 --> 00:00:13,040 Speaker 1: Hello and welcome to The Australian's Money Puzzle podcast. I'm 2 00:00:13,080 --> 00:00:16,840 Speaker 1: James Kirkby. Welcome aboard everybody. You've probably read and seen 3 00:00:17,079 --> 00:00:19,960 Speaker 1: that in twenty twenty six, the expectation is very much 4 00:00:20,000 --> 00:00:24,800 Speaker 1: that small cap company smaller stocks will beat large cap stocks. 5 00:00:24,800 --> 00:00:29,040 Speaker 1: They certainly did so last year. That's expected to extend 6 00:00:29,120 --> 00:00:31,880 Speaker 1: in the year ahead. And today I have a small 7 00:00:32,000 --> 00:00:36,519 Speaker 1: caps fund manager specialist who has beaten the market so 8 00:00:36,800 --> 00:00:39,880 Speaker 1: far with his fund. He's better known far and white 9 00:00:39,880 --> 00:00:44,199 Speaker 1: for his exploits in AFL. It's Chris Judd, former Carton 10 00:00:44,280 --> 00:00:48,199 Speaker 1: and West Eagles star who now takes his risks in 11 00:00:48,320 --> 00:00:52,720 Speaker 1: the share market with the Serruti Macro Group. How are you, Chris? 12 00:00:53,320 --> 00:00:55,120 Speaker 2: Very well, Jimes, thanks for having me on the show. 13 00:00:55,240 --> 00:00:57,760 Speaker 2: Looking forward to sitting down and having each other about stocks. 14 00:00:58,280 --> 00:01:01,160 Speaker 1: Well, you know, small caps, which is your I know 15 00:01:01,360 --> 00:01:03,959 Speaker 1: it's not exclusively your area, but it's very much your 16 00:01:03,960 --> 00:01:06,000 Speaker 1: area for the moment in your fund, and that's where 17 00:01:06,000 --> 00:01:10,840 Speaker 1: you've concentrated so far. So it did as an area 18 00:01:11,400 --> 00:01:14,640 Speaker 1: of investing, it did better than large caps last year. 19 00:01:14,680 --> 00:01:17,199 Speaker 1: That's not always the case. And we've actually had shows 20 00:01:17,240 --> 00:01:19,760 Speaker 1: on this already that it is expected to do better 21 00:01:20,040 --> 00:01:23,000 Speaker 1: than the bigger caps in this year. 22 00:01:23,080 --> 00:01:23,200 Speaker 3: Now. 23 00:01:23,240 --> 00:01:25,920 Speaker 1: I was just looking this morning getting prepared for the show, 24 00:01:25,920 --> 00:01:28,000 Speaker 1: and I see, in fact that isn't the case so 25 00:01:28,080 --> 00:01:30,759 Speaker 1: far this year. That is, small caps as a sector 26 00:01:31,000 --> 00:01:34,160 Speaker 1: has slightly underperformed large caps. But will take it that 27 00:01:34,480 --> 00:01:37,080 Speaker 1: the wind is behind you. Why is it seeing that 28 00:01:37,120 --> 00:01:40,319 Speaker 1: small caps will do better than the big guys this year? 29 00:01:41,120 --> 00:01:42,839 Speaker 3: So I don't broadly think they will. 30 00:01:43,160 --> 00:01:47,440 Speaker 2: I think small caps in Australia are incrediblyli on interest 31 00:01:47,520 --> 00:01:51,480 Speaker 2: right cuts to do well. I think small cap stocks 32 00:01:51,760 --> 00:01:55,000 Speaker 2: rely on not just institutional fliers, but also on retail 33 00:01:55,040 --> 00:01:58,120 Speaker 2: flowers of mom and dad investors, and when interest rates 34 00:01:58,200 --> 00:02:01,120 Speaker 2: are going up as they currently are, those mum and 35 00:02:01,200 --> 00:02:03,240 Speaker 2: dads feel at the value of their house is worth less, 36 00:02:03,360 --> 00:02:07,200 Speaker 2: their bills are higher, and they that have less money 37 00:02:07,280 --> 00:02:09,800 Speaker 2: to invest or feel like they have money less money 38 00:02:09,840 --> 00:02:12,040 Speaker 2: to invest because they look at their biggest asset deg 39 00:02:12,200 --> 00:02:15,200 Speaker 2: their house, and they're less confident about taking risk elsewhare 40 00:02:15,320 --> 00:02:18,280 Speaker 2: so broadly speaking, I'd take the other side of that. 41 00:02:18,480 --> 00:02:21,519 Speaker 2: I suspect if we get another two rate rises, which 42 00:02:21,520 --> 00:02:24,400 Speaker 2: I think is currently consensus this year, I think large 43 00:02:24,400 --> 00:02:27,200 Speaker 2: cap stocks, which rely on super annuation flows which are 44 00:02:27,280 --> 00:02:31,000 Speaker 2: much more steady and reliable, will outperform. But I do 45 00:02:31,080 --> 00:02:35,600 Speaker 2: think there are stock specific small caps which have macro 46 00:02:35,720 --> 00:02:39,720 Speaker 2: tailings that's going to overpower that interest rate environment. So 47 00:02:39,800 --> 00:02:41,960 Speaker 2: if you look at a lot of things, you know, 48 00:02:42,000 --> 00:02:44,840 Speaker 2: Trump are talking about critical minerals is obviously front of 49 00:02:44,880 --> 00:02:47,120 Speaker 2: mind for a lot of investors. But tomorrow we think 50 00:02:47,120 --> 00:02:50,960 Speaker 2: that'll be shipbuilding, manufacturing capacity, currency debasement, etc. 51 00:02:51,520 --> 00:02:54,120 Speaker 1: It's interesting. I mean, certainly, I don't who knows what 52 00:02:54,120 --> 00:02:56,600 Speaker 1: would happen, but certainly the argument that riats are going 53 00:02:56,639 --> 00:02:58,800 Speaker 1: up has just been sort of fortified, if you like, 54 00:02:58,840 --> 00:03:01,440 Speaker 1: by the outbreak of the OR, which we've had a 55 00:03:01,520 --> 00:03:04,760 Speaker 1: show on just a few days ago. Okay, now the 56 00:03:04,800 --> 00:03:08,480 Speaker 1: obvious question, and you've thrown me to some extent, which 57 00:03:08,560 --> 00:03:12,519 Speaker 1: is always good. But with ETFs, which have been the 58 00:03:12,560 --> 00:03:15,640 Speaker 1: great challenge for all fun active fund managers, and you're 59 00:03:15,680 --> 00:03:18,280 Speaker 1: an active fund manager, right, your value proposal out there 60 00:03:18,360 --> 00:03:23,280 Speaker 1: is I pick or we pick the winners. But certainly 61 00:03:23,320 --> 00:03:25,920 Speaker 1: with something like an ETF OR, you've got hundreds and 62 00:03:26,120 --> 00:03:30,840 Speaker 1: hundreds of companies of wildly variable quality, often very much 63 00:03:30,880 --> 00:03:34,880 Speaker 1: dependent on people onlike say a large cap here if 64 00:03:34,880 --> 00:03:39,080 Speaker 1: the BHP management team, for some reason lexit tomorrow. BHP 65 00:03:39,200 --> 00:03:41,640 Speaker 1: probably would be able to continue on. But a small 66 00:03:41,640 --> 00:03:44,560 Speaker 1: cap company is often just a little kernel group of 67 00:03:44,560 --> 00:03:48,120 Speaker 1: people who've done things very well, and so they are 68 00:03:48,120 --> 00:03:51,080 Speaker 1: more volatile. For the person who says, yeah I like 69 00:03:51,120 --> 00:03:53,120 Speaker 1: small caps, Yeah I'm into that, but you know this, 70 00:03:53,520 --> 00:03:57,000 Speaker 1: it's so variable. I prefer to just buy an ETF 71 00:03:57,000 --> 00:03:58,720 Speaker 1: and just buy the small cap sector and that it 72 00:03:58,800 --> 00:04:01,160 Speaker 1: does better than big caps one I'm going to win. 73 00:04:01,600 --> 00:04:04,520 Speaker 1: How do you differentiate from the ETFs. 74 00:04:05,440 --> 00:04:09,200 Speaker 2: Well, I mean, if you look at ETF buying, it's 75 00:04:09,240 --> 00:04:11,160 Speaker 2: I mean, we don't invest for ideology, but it's very 76 00:04:11,200 --> 00:04:13,640 Speaker 2: much anti capitalists to start off with, to just buy 77 00:04:13,720 --> 00:04:15,200 Speaker 2: a company based on its size. 78 00:04:15,240 --> 00:04:17,120 Speaker 1: But you're saying that it's a bit dumb. Is it dumb? 79 00:04:17,240 --> 00:04:17,360 Speaker 3: Is that? 80 00:04:17,400 --> 00:04:18,960 Speaker 1: What do you mean that it's none thinking? 81 00:04:19,920 --> 00:04:21,680 Speaker 2: Well, yeah, I mean we think capital should go to 82 00:04:21,720 --> 00:04:24,720 Speaker 2: it where it's most efficient. And to just say that 83 00:04:24,800 --> 00:04:27,000 Speaker 2: I'm going to buy ASX two hundred, which really means 84 00:04:27,040 --> 00:04:29,679 Speaker 2: I'm going to buy four percent in Commonwealth Bank, twelve 85 00:04:29,680 --> 00:04:33,800 Speaker 2: percent in BOHP or whatever those percentages are. I think 86 00:04:33,839 --> 00:04:36,039 Speaker 2: it's fine as a savings tool, but I think the 87 00:04:36,160 --> 00:04:39,719 Speaker 2: idea that that smart people have the time to meet management, 88 00:04:40,080 --> 00:04:42,760 Speaker 2: can't be more efficient. I think that's wrong, and there 89 00:04:42,760 --> 00:04:45,200 Speaker 2: are plenty of active managers over the journey that can 90 00:04:45,240 --> 00:04:48,120 Speaker 2: beat the index. It's also a dangerous thing to believe, 91 00:04:48,839 --> 00:04:50,640 Speaker 2: you know. It was interesting that Buffett would say just 92 00:04:50,680 --> 00:04:53,760 Speaker 2: by ETFs when he was one of the great active 93 00:04:53,800 --> 00:04:56,560 Speaker 2: managers of all time. You know, coming from my background 94 00:04:56,640 --> 00:05:01,800 Speaker 2: in professional football, the odds of playing professional sport as 95 00:05:01,839 --> 00:05:04,800 Speaker 2: an UNDERNIGNS footballer or a gazine into one. 96 00:05:05,080 --> 00:05:06,840 Speaker 3: You know, if you told every kid, don't even bother 97 00:05:06,920 --> 00:05:07,360 Speaker 3: about it. 98 00:05:07,839 --> 00:05:10,279 Speaker 2: You know, the odds of you winning in your pursuit 99 00:05:10,320 --> 00:05:12,120 Speaker 2: to play professional sport is so unlikely. 100 00:05:12,520 --> 00:05:14,559 Speaker 3: Don't even think about it. You know, what a terrible 101 00:05:14,920 --> 00:05:15,479 Speaker 3: way to live. 102 00:05:15,880 --> 00:05:18,520 Speaker 1: So it's a lack of aspiration? Is it to just 103 00:05:18,960 --> 00:05:22,160 Speaker 1: broadly wander into ETFs and I check what the market 104 00:05:22,240 --> 00:05:22,760 Speaker 1: has to offer? 105 00:05:23,440 --> 00:05:25,520 Speaker 2: I'm saying it's lack of aspiration. If you've got time 106 00:05:25,560 --> 00:05:29,400 Speaker 2: to meet management, think for yourself and think clearly about 107 00:05:29,440 --> 00:05:32,200 Speaker 2: what could happen in the world if you don't have 108 00:05:32,279 --> 00:05:34,080 Speaker 2: the time or the skill set to do those things. 109 00:05:34,120 --> 00:05:36,840 Speaker 2: It makes perfect sense as a savings tool for people 110 00:05:36,880 --> 00:05:38,240 Speaker 2: that just want to be able to sleep at night. 111 00:05:38,720 --> 00:05:40,599 Speaker 2: And have a savings tool that should be able to 112 00:05:40,600 --> 00:05:43,760 Speaker 2: grow steadily and compound over time. But yeah, I think 113 00:05:43,760 --> 00:05:45,719 Speaker 2: for people who are skilled at what they do, that 114 00:05:45,800 --> 00:05:48,560 Speaker 2: have access to management and can think for themselves, I 115 00:05:48,600 --> 00:05:52,839 Speaker 2: think it's non aspirational and also problematic if you extrapolate 116 00:05:52,880 --> 00:05:57,279 Speaker 2: it to the extremes and companies just get funding depending 117 00:05:57,320 --> 00:06:00,000 Speaker 2: on their size. Isn't a great lead to or partsis 118 00:06:00,160 --> 00:06:03,640 Speaker 2: in a way to invest due to ideology. But at 119 00:06:03,680 --> 00:06:05,720 Speaker 2: the extremes it becomes problematic as well. 120 00:06:05,800 --> 00:06:06,000 Speaker 3: Yeah. 121 00:06:06,040 --> 00:06:08,000 Speaker 1: Sure, that sort of weight of money argument where this 122 00:06:08,080 --> 00:06:10,279 Speaker 1: sort of the money flows into super by low and 123 00:06:10,320 --> 00:06:12,760 Speaker 1: then it flows out the super into the big cap stocks, 124 00:06:12,760 --> 00:06:14,800 Speaker 1: and the big cap stocks keep getting the money. Yeah, 125 00:06:14,880 --> 00:06:19,120 Speaker 1: I understand. So with your area, there is actually, before 126 00:06:19,160 --> 00:06:21,760 Speaker 1: you say it, I'll say it, there is some academic 127 00:06:21,839 --> 00:06:26,400 Speaker 1: sort of proof that active management can form better in 128 00:06:26,480 --> 00:06:30,560 Speaker 1: the small cap space because there is so little research, right, 129 00:06:30,600 --> 00:06:32,159 Speaker 1: so I so little, don't I mean even in my 130 00:06:32,200 --> 00:06:34,920 Speaker 1: own world, I can tell you that twenty years ago, 131 00:06:35,440 --> 00:06:39,160 Speaker 1: the coverage of companies in the media, for instance, there 132 00:06:39,240 --> 00:06:41,800 Speaker 1: was good coverage right across and many small caps were 133 00:06:41,839 --> 00:06:44,520 Speaker 1: also covered. I don't see them covered anymore. Individual small 134 00:06:44,520 --> 00:06:47,120 Speaker 1: cup companies, they're never small, they're never covered and stop 135 00:06:47,160 --> 00:06:50,240 Speaker 1: broking researchers don't cover them, so it's uncharted terrain. So 136 00:06:50,320 --> 00:06:54,480 Speaker 1: you have this great opportunity to get in there find 137 00:06:54,480 --> 00:06:59,560 Speaker 1: the company that no one's found. But what how do 138 00:06:59,640 --> 00:07:03,760 Speaker 1: you with the particular risk of the small cap fund manager, 139 00:07:03,800 --> 00:07:06,880 Speaker 1: which is the particular vulnerabilities if you like, of small 140 00:07:06,920 --> 00:07:09,960 Speaker 1: cap companies where it's a great company which has a 141 00:07:09,960 --> 00:07:12,080 Speaker 1: great product but a great team, but that can go 142 00:07:12,160 --> 00:07:15,440 Speaker 1: after is really fast and as I say, that's not 143 00:07:15,480 --> 00:07:17,280 Speaker 1: going to happen to come Bank or bh B, It's 144 00:07:17,320 --> 00:07:19,000 Speaker 1: just isn't going to happen. They have that sort of 145 00:07:19,040 --> 00:07:22,200 Speaker 1: fortress that most that investors like. So how do you 146 00:07:22,200 --> 00:07:22,720 Speaker 1: get around that? 147 00:07:23,880 --> 00:07:25,760 Speaker 2: There's a few things to touch on there. I think 148 00:07:25,800 --> 00:07:28,080 Speaker 2: the big opportunity in small caps A is there under 149 00:07:28,080 --> 00:07:31,200 Speaker 2: research and under owned, but B it's who's on the 150 00:07:31,240 --> 00:07:34,240 Speaker 2: other side of the trade. Often, so when you're buying 151 00:07:34,440 --> 00:07:36,840 Speaker 2: the HP or Commonwealth, the person you're buying that off 152 00:07:37,040 --> 00:07:40,760 Speaker 2: or selling it too is usually another fund that has 153 00:07:40,840 --> 00:07:45,360 Speaker 2: analysts and research teams and execution teams. Often when you're 154 00:07:45,360 --> 00:07:48,160 Speaker 2: buying a small cap stock, the person you're buying and 155 00:07:48,200 --> 00:07:50,679 Speaker 2: selling that off is a mom and dad that's working 156 00:07:50,720 --> 00:07:53,640 Speaker 2: fifty hours a week that's exhausted and emotional and hasn't 157 00:07:53,640 --> 00:07:56,320 Speaker 2: met management and just hasn't had the time or the 158 00:07:56,360 --> 00:07:59,960 Speaker 2: skill set to form a more functional opinion on that stuff. 159 00:08:00,240 --> 00:08:03,560 Speaker 2: So it gives you a greater chance to win. And 160 00:08:04,000 --> 00:08:07,640 Speaker 2: the second side of it around risk. From my perspective, 161 00:08:07,680 --> 00:08:11,200 Speaker 2: small companies, they're much easier for us to access management, right, 162 00:08:11,280 --> 00:08:12,400 Speaker 2: I'm not going to get a one on one with 163 00:08:12,440 --> 00:08:15,960 Speaker 2: BOHP management. They're also generally easier businesses for us to 164 00:08:16,080 --> 00:08:20,200 Speaker 2: understand because they have fewer business divisions, fewer currency risks, 165 00:08:20,360 --> 00:08:24,280 Speaker 2: et cetera. But also we size it appropriately, So two 166 00:08:24,320 --> 00:08:26,760 Speaker 2: percent of the farm is a small position for us, 167 00:08:27,160 --> 00:08:30,400 Speaker 2: four percent is a large position, And that sizing is 168 00:08:30,440 --> 00:08:32,280 Speaker 2: really important as well when you're investing. 169 00:08:32,160 --> 00:08:34,960 Speaker 1: A maximum cap of four percent on a single individ No, 170 00:08:35,040 --> 00:08:35,800 Speaker 1: we don't have a cap. 171 00:08:35,920 --> 00:08:40,440 Speaker 2: So the industry is filled with mandates where funds create 172 00:08:40,480 --> 00:08:43,559 Speaker 2: all these synthetic rules that turn into jails. So to 173 00:08:43,760 --> 00:08:46,120 Speaker 2: explain what you mean by that, tris well, So if 174 00:08:46,120 --> 00:08:48,240 Speaker 2: I was to optimize for my business and I wanted 175 00:08:48,240 --> 00:08:52,200 Speaker 2: to grow our fund as bigly as possible and get 176 00:08:52,240 --> 00:08:55,360 Speaker 2: the biggest management fees available. I would make sure we 177 00:08:55,400 --> 00:08:58,000 Speaker 2: were selling a very specific type of fund, a small 178 00:08:58,000 --> 00:09:00,880 Speaker 2: cap fund where we only invest in small cap Australian shares, 179 00:09:01,240 --> 00:09:03,959 Speaker 2: or a growth fund or a value fund, and I 180 00:09:03,960 --> 00:09:07,040 Speaker 2: will go to the wealth allocators. Wealth managers and capital 181 00:09:07,040 --> 00:09:09,640 Speaker 2: allocators say here's Australians that they go, Okay, that fits 182 00:09:09,640 --> 00:09:12,559 Speaker 2: neatly in our basket. We've got X to spend here, 183 00:09:13,000 --> 00:09:15,440 Speaker 2: and you can grow your fund quickly in that environment. 184 00:09:15,720 --> 00:09:18,120 Speaker 2: The issue with that is if you're just a growth 185 00:09:18,200 --> 00:09:21,480 Speaker 2: fund and every three or four years growth completely tanks, 186 00:09:22,559 --> 00:09:25,440 Speaker 2: you don't have the ability to protect yourself elsewhere, and 187 00:09:25,480 --> 00:09:27,520 Speaker 2: those growth funds in those times go to the allocation 188 00:09:27,600 --> 00:09:29,640 Speaker 2: and go, I hope your value funds did well this year. 189 00:09:30,240 --> 00:09:33,280 Speaker 2: So myself, all my liquid net wealth is in this strategy. 190 00:09:33,559 --> 00:09:35,920 Speaker 2: My parents all their wealth, full stop is in this strategy. 191 00:09:36,200 --> 00:09:37,719 Speaker 2: It needs to be able to work in lots of 192 00:09:37,800 --> 00:09:40,800 Speaker 2: different environments, not just when you see it's in distructgy 193 00:09:40,800 --> 00:09:42,920 Speaker 2: Did you mean it's in the fund. Yeah, So our 194 00:09:42,960 --> 00:09:45,960 Speaker 2: fund is not just a small cap fund. We've owned 195 00:09:46,000 --> 00:09:49,800 Speaker 2: Google before, for instance, but when liquidity environment is reasonable 196 00:09:49,880 --> 00:09:52,200 Speaker 2: or better, most of our stocks are in the small 197 00:09:52,240 --> 00:09:52,800 Speaker 2: cap space. 198 00:09:53,000 --> 00:09:55,600 Speaker 1: Okay, okay, very good. I think we take a break. 199 00:09:55,600 --> 00:09:58,479 Speaker 1: I want to talk to you about something that I 200 00:09:58,520 --> 00:10:00,720 Speaker 1: always put a small cap fund there, which is you've 201 00:10:00,720 --> 00:10:03,000 Speaker 1: got this great advantage right, it's you found this company, 202 00:10:03,080 --> 00:10:05,880 Speaker 1: no one else knows it. Problem is the risk is 203 00:10:07,400 --> 00:10:10,319 Speaker 1: you've nothing, You've no other sounding board and are they 204 00:10:10,320 --> 00:10:21,360 Speaker 1: telling you the truth? Back in a moment, Hello, Welcome 205 00:10:21,360 --> 00:10:24,280 Speaker 1: back to The Australian's Money Puzzle podcast. I'm James Kirby 206 00:10:24,320 --> 00:10:27,439 Speaker 1: and I'm talking to Chris Judd, who is the manager 207 00:10:27,520 --> 00:10:32,640 Speaker 1: at the Servicey Macro Fund, which is a fund that 208 00:10:32,840 --> 00:10:35,800 Speaker 1: has it's mostly concentrated in small caps. I'll give you 209 00:10:35,840 --> 00:10:37,520 Speaker 1: the floor for one minute to tell us how you've 210 00:10:37,559 --> 00:10:40,120 Speaker 1: been performing. Tell us how the small cap index did 211 00:10:40,160 --> 00:10:41,640 Speaker 1: last year and how you did against it. 212 00:10:42,800 --> 00:10:43,000 Speaker 3: Yeah. 213 00:10:43,000 --> 00:10:46,000 Speaker 2: Oh, the last twelve months we did thirties just dowunder 214 00:10:46,040 --> 00:10:48,440 Speaker 2: thirty six percent, which was a really good twelve month period. 215 00:10:48,800 --> 00:10:51,880 Speaker 2: I think how index was in the mid twenties, So 216 00:10:52,080 --> 00:10:53,800 Speaker 2: small caps had a really good year over the last 217 00:10:53,840 --> 00:10:56,840 Speaker 2: twelve months since we started the fund. We've been annualizing 218 00:10:56,880 --> 00:10:59,880 Speaker 2: a bit out of twenty five percent. And I think 219 00:11:00,040 --> 00:11:03,240 Speaker 2: that detail index by that Timpson is so Father's early dies. 220 00:11:03,360 --> 00:11:04,920 Speaker 2: You know, we're almost three is into the fund. 221 00:11:04,920 --> 00:11:06,679 Speaker 1: I was going to say, you're three years into the fund. Yes, 222 00:11:06,760 --> 00:11:08,439 Speaker 1: So so people would look for a track record, of 223 00:11:08,480 --> 00:11:10,160 Speaker 1: course with funds of three to five years. But that 224 00:11:10,280 --> 00:11:12,600 Speaker 1: is that that is, and I could say, someone could 225 00:11:12,640 --> 00:11:14,120 Speaker 1: very quickly say, well, you know, he's got to win 226 00:11:14,200 --> 00:11:16,200 Speaker 1: behind him. Small caps have been very hot for a while, 227 00:11:16,240 --> 00:11:18,120 Speaker 1: but that doesn't mean people don't lose money. 228 00:11:18,280 --> 00:11:20,720 Speaker 2: When we started, you had negative money supply in the US. 229 00:11:20,840 --> 00:11:23,080 Speaker 2: Small caps were horrible in twenty twenty three, and we 230 00:11:23,080 --> 00:11:26,439 Speaker 2: were invested largely a lot in large caps during that time. 231 00:11:26,760 --> 00:11:31,920 Speaker 1: Okay, now here's the risk. I imagine for you the small caps. 232 00:11:32,200 --> 00:11:34,600 Speaker 1: You go into the company and you've got great access 233 00:11:34,640 --> 00:11:36,760 Speaker 1: I mean as a fund manager, to access as Chris Judge. 234 00:11:36,760 --> 00:11:38,360 Speaker 1: Someone's going to answer the phone to you anyway, if 235 00:11:38,360 --> 00:11:40,280 Speaker 1: they know anything about sport at all. That I'm presuming 236 00:11:40,280 --> 00:11:43,920 Speaker 1: you get indoors that others don't. But that doesn't stop 237 00:11:43,920 --> 00:11:46,480 Speaker 1: people lying to you or exaggerating to you. And you 238 00:11:46,520 --> 00:11:49,040 Speaker 1: don't have six different analysts to call and say, what 239 00:11:49,080 --> 00:11:51,960 Speaker 1: did you think? You're on your own. So how do 240 00:11:52,000 --> 00:11:52,920 Speaker 1: you manage that risk? 241 00:11:54,559 --> 00:11:56,640 Speaker 2: Well, that's the art of it. To be honest, but 242 00:11:57,040 --> 00:12:01,160 Speaker 2: we there's certain social cure you're looking for when you're 243 00:12:01,200 --> 00:12:03,240 Speaker 2: speaking to management. You know that they touch their face 244 00:12:03,280 --> 00:12:05,920 Speaker 2: after making a big statement. How do they treat their CFO? 245 00:12:06,720 --> 00:12:08,440 Speaker 2: What's their interaction in relationship? 246 00:12:08,559 --> 00:12:10,560 Speaker 3: Like there? Then you asked around. 247 00:12:10,960 --> 00:12:14,320 Speaker 2: You know, one of the things that other companies are 248 00:12:14,400 --> 00:12:18,120 Speaker 2: usually really comfortable on is sharing views on their competitors. 249 00:12:18,240 --> 00:12:21,400 Speaker 1: And we can get okay, but tell me, as I said, 250 00:12:21,440 --> 00:12:23,720 Speaker 1: the point is, you're on your own to some extent, 251 00:12:23,760 --> 00:12:26,800 Speaker 1: and you are dependent on the honesty of the management 252 00:12:27,280 --> 00:12:29,920 Speaker 1: in telling you about not just how the company is going, 253 00:12:29,960 --> 00:12:33,080 Speaker 1: but how they expect it to go. How have you 254 00:12:33,120 --> 00:12:36,000 Speaker 1: gone with that? Have you had occasional where someone's let 255 00:12:36,000 --> 00:12:36,520 Speaker 1: you down on that? 256 00:12:37,080 --> 00:12:37,520 Speaker 3: Of course? 257 00:12:37,679 --> 00:12:39,840 Speaker 2: Yeah, of course that's again and we're just really ruthless 258 00:12:39,840 --> 00:12:42,840 Speaker 2: in selling once we feel we've been misled. That's one 259 00:12:42,880 --> 00:12:46,240 Speaker 2: thing we don't have second chance for. Like we're reasonably 260 00:12:46,240 --> 00:12:48,320 Speaker 2: comfortable with that, other funds aren't. You know a lot 261 00:12:48,360 --> 00:12:50,880 Speaker 2: of funds really sweat each quarter to quarter and they 262 00:12:50,880 --> 00:12:53,120 Speaker 2: want the numbers to be precise in that quarter. I've 263 00:12:53,160 --> 00:12:56,640 Speaker 2: had operating businesses before. We've found in an apparel business 264 00:12:56,720 --> 00:12:59,480 Speaker 2: with a friend. Things don't legally fall at the end 265 00:12:59,520 --> 00:13:01,800 Speaker 2: of each month, every month, or at the end of 266 00:13:01,800 --> 00:13:04,840 Speaker 2: each quarter, and so we're sympathetic or really try to 267 00:13:04,960 --> 00:13:07,600 Speaker 2: understand how the business works, not just how the numbers work. 268 00:13:08,120 --> 00:13:10,280 Speaker 2: So we're sympathetic if there's a bad quarter, if we 269 00:13:10,400 --> 00:13:12,880 Speaker 2: understand the reasons. What we're not sympathetic on is if 270 00:13:12,920 --> 00:13:14,880 Speaker 2: we've been lied to or misled and we just sell 271 00:13:14,920 --> 00:13:16,920 Speaker 2: them move on to the next adventure. I guess the 272 00:13:17,000 --> 00:13:19,719 Speaker 2: metaphor which some people find a bit offensive, but it's 273 00:13:19,760 --> 00:13:23,040 Speaker 2: like we view ourselves as the most attractive woman in 274 00:13:23,080 --> 00:13:24,079 Speaker 2: the world at a bar. 275 00:13:24,400 --> 00:13:25,160 Speaker 3: We've got capital. 276 00:13:25,200 --> 00:13:27,640 Speaker 2: We can invest in any company we want, all the 277 00:13:27,679 --> 00:13:30,680 Speaker 2: companies of the bloke's coming up to us. If someone's 278 00:13:30,679 --> 00:13:32,679 Speaker 2: got bad breadth, or we don't like their teeth, or 279 00:13:33,040 --> 00:13:35,120 Speaker 2: he's bored, we don't have to invest in it. 280 00:13:35,280 --> 00:13:35,520 Speaker 3: You know. 281 00:13:36,000 --> 00:13:38,560 Speaker 1: For telling me, your total funds under management are in 282 00:13:38,640 --> 00:13:40,839 Speaker 1: the obosking the thing, it's pretty smaller. I want to 283 00:13:40,840 --> 00:13:41,440 Speaker 1: be done under. 284 00:13:41,480 --> 00:13:45,120 Speaker 4: Small it's seventy five million bucks. So you don't have 285 00:13:45,160 --> 00:13:47,560 Speaker 4: this great depth of liquidity if things went wrong. Do 286 00:13:47,600 --> 00:13:49,720 Speaker 4: you have a do you have or do you aspire 287 00:13:49,800 --> 00:13:52,679 Speaker 4: to have a sort of big daddy step someone to 288 00:13:52,679 --> 00:13:54,599 Speaker 4: take a stick in you, because as an investor, I 289 00:13:54,640 --> 00:13:56,400 Speaker 4: would like to see that if I was with you. 290 00:13:57,600 --> 00:14:01,160 Speaker 2: Wow, I disagree, but I think it's much harder to 291 00:14:01,240 --> 00:14:04,400 Speaker 2: double a four billion dollar portfolio than it is a 292 00:14:04,440 --> 00:14:07,559 Speaker 2: seventy five million dollar portfolio. We can get into things 293 00:14:07,600 --> 00:14:11,400 Speaker 2: that are under research, and we also invest while we're investigating, 294 00:14:11,600 --> 00:14:13,600 Speaker 2: which gets really hard to do. The bigger you get, 295 00:14:14,040 --> 00:14:17,280 Speaker 2: we can meet a company like it, start investigating, and 296 00:14:17,360 --> 00:14:20,120 Speaker 2: start buying at the same time. Two days later, we 297 00:14:20,160 --> 00:14:22,680 Speaker 2: can find something we don't like, sell the position and 298 00:14:22,680 --> 00:14:24,760 Speaker 2: there's been no harm done. That's incredibly hard to do 299 00:14:25,120 --> 00:14:27,080 Speaker 2: when you're sort of a four or five billion dollar fund. 300 00:14:27,120 --> 00:14:28,760 Speaker 2: So we think there's a real edge in being small. 301 00:14:29,000 --> 00:14:31,040 Speaker 2: I think if you're a tenion dollar fund, sure you're 302 00:14:31,120 --> 00:14:34,240 Speaker 2: vulnerable because your cost base becomes a bit restrictive if 303 00:14:34,240 --> 00:14:37,880 Speaker 2: you don't grow your fun But no, I think you know. 304 00:14:38,240 --> 00:14:41,440 Speaker 2: Under I think under four or five hundred million is 305 00:14:41,480 --> 00:14:44,200 Speaker 2: sort of the sweet spot for funds where they can 306 00:14:44,240 --> 00:14:46,400 Speaker 2: be sophisticated enough, but they have a real edge in 307 00:14:46,480 --> 00:14:50,160 Speaker 2: terms of speed of decision making and liquidity that the 308 00:14:50,240 --> 00:14:51,480 Speaker 2: larger funds miss out on. 309 00:14:51,960 --> 00:14:53,520 Speaker 3: And we're not chasing super fund flowers. 310 00:14:53,520 --> 00:14:56,480 Speaker 1: Like when you see small funds shuttering their doors, which 311 00:14:56,480 --> 00:14:59,360 Speaker 1: they often do these days, often explaining that it's become 312 00:14:59,400 --> 00:14:59,920 Speaker 1: too hard. 313 00:15:00,680 --> 00:15:02,440 Speaker 2: What do you think, Well, you need fifty million bucks 314 00:15:02,440 --> 00:15:04,680 Speaker 2: to really wash your face in terms of all the costs. 315 00:15:04,920 --> 00:15:08,640 Speaker 2: So it's incredibly hard to people would be amazed to 316 00:15:08,680 --> 00:15:10,560 Speaker 2: have expensive is to start a fund. So if you've 317 00:15:10,600 --> 00:15:13,280 Speaker 2: got a proper trustee which we do in equity trustees 318 00:15:13,600 --> 00:15:17,760 Speaker 2: the custody and a jpm organ fund administrator XYZ, you 319 00:15:17,880 --> 00:15:19,800 Speaker 2: need to get to at least fifty million bucks for 320 00:15:19,840 --> 00:15:22,720 Speaker 2: management fees to sort of wash your face. And obviously, 321 00:15:22,760 --> 00:15:25,640 Speaker 2: when funds just don't get to that level, there's an 322 00:15:25,640 --> 00:15:28,080 Speaker 2: extended period of time where they just are unable to 323 00:15:28,120 --> 00:15:30,800 Speaker 2: keep writing out checks for a loss making business. So 324 00:15:30,840 --> 00:15:33,360 Speaker 2: that's sort of what happens. But once funds are over 325 00:15:33,360 --> 00:15:36,320 Speaker 2: that fifty million dollars hurdle, you know, we think they're 326 00:15:36,320 --> 00:15:39,240 Speaker 2: in a sweet spot of operating wise, going to survive, 327 00:15:39,400 --> 00:15:41,560 Speaker 2: but it still being small and nimble enough that they've 328 00:15:41,560 --> 00:15:45,640 Speaker 2: got an eage. That size is not just liquidity. We 329 00:15:45,680 --> 00:15:48,400 Speaker 2: don't have industry super fund money for instance, you know, 330 00:15:48,840 --> 00:15:51,360 Speaker 2: taking on that sort of money, it's a huge pool 331 00:15:51,400 --> 00:15:53,960 Speaker 2: of capital, and most managers are desperate for it because 332 00:15:53,960 --> 00:15:55,920 Speaker 2: of the management fees that come with it, But the 333 00:15:56,000 --> 00:15:58,880 Speaker 2: restrictions are enormous. You know this whole list of naughty stocks? 334 00:15:59,040 --> 00:16:01,160 Speaker 1: Is it all mom and dad money? You have retail money. 335 00:16:01,760 --> 00:16:04,240 Speaker 2: Yeah, we've got some family officers and most of our 336 00:16:04,280 --> 00:16:07,120 Speaker 2: investors are self managed super fund high networths. 337 00:16:07,240 --> 00:16:09,840 Speaker 1: Very good. All right, Now, let's just talk about small 338 00:16:09,840 --> 00:16:11,960 Speaker 1: caps for a moment. It's difficult to do that because 339 00:16:11,960 --> 00:16:14,160 Speaker 1: there's so many. How many are you comfortable with? How 340 00:16:14,160 --> 00:16:18,000 Speaker 1: many individual small cap stocks are you comfortable within the 341 00:16:18,040 --> 00:16:19,040 Speaker 1: fund at any given time. 342 00:16:20,320 --> 00:16:24,600 Speaker 2: We've got thirty eight positions currently. But for us even 343 00:16:24,680 --> 00:16:27,040 Speaker 2: that's a bit misleading in a sense of we've got 344 00:16:27,040 --> 00:16:31,200 Speaker 2: four gold stocks, which to us is basically one position. 345 00:16:31,960 --> 00:16:35,520 Speaker 2: So we're not technical mining experts. We like gold as 346 00:16:35,520 --> 00:16:39,360 Speaker 2: an asset class, So rather than take a level of 347 00:16:39,440 --> 00:16:41,880 Speaker 2: risk where we could get the idea right in the 348 00:16:41,920 --> 00:16:44,360 Speaker 2: trade wrong, we've spread that risk over. I guess it's 349 00:16:44,400 --> 00:16:47,720 Speaker 2: like a homemade ETF. So we got two uranium stocks, 350 00:16:47,720 --> 00:16:50,480 Speaker 2: which again to us is really one position. But yeah, 351 00:16:50,520 --> 00:16:52,920 Speaker 2: by and large, you've got thirty eight current positions. 352 00:16:52,520 --> 00:16:55,760 Speaker 1: All right, and inside this small cap sector, I mean, 353 00:16:55,800 --> 00:16:59,120 Speaker 1: obviously goods, red hot, so deliverage gold, companies that are 354 00:16:59,160 --> 00:17:02,040 Speaker 1: just absolutely flowing as you'd expect them to be. That 355 00:17:02,080 --> 00:17:04,159 Speaker 1: doesn't mean they can't get things wrong, of course, but 356 00:17:04,359 --> 00:17:07,399 Speaker 1: just from a sexual point of view, where are you 357 00:17:07,440 --> 00:17:09,040 Speaker 1: looking right now? Where are you hunting? 358 00:17:10,040 --> 00:17:13,240 Speaker 2: Yeah, so we've got a revise towards stops with high 359 00:17:13,320 --> 00:17:16,000 Speaker 2: amounts of tangible assets on their balance sheets. 360 00:17:16,160 --> 00:17:19,560 Speaker 1: Like hard assets. Why is that that sounds like industrious 361 00:17:19,560 --> 00:17:19,760 Speaker 1: to me? 362 00:17:20,480 --> 00:17:21,080 Speaker 3: Yeah, that's right. 363 00:17:21,160 --> 00:17:24,800 Speaker 2: So in tangel assets, if you look at the amount 364 00:17:24,840 --> 00:17:29,960 Speaker 2: they create of balance sheet number in the US is 365 00:17:30,000 --> 00:17:33,160 Speaker 2: just growing exponentially, and we think that's coming to an end. 366 00:17:33,400 --> 00:17:36,119 Speaker 2: We think that's rolling over, and we think Stock's going 367 00:17:36,160 --> 00:17:39,720 Speaker 2: to win tomorrow and not the software darlings of yesterday, 368 00:17:39,720 --> 00:17:43,040 Speaker 2: which have already started to roll over, but you know, 369 00:17:43,160 --> 00:17:47,000 Speaker 2: companies that actually produce things hard assets Stock. 370 00:17:47,040 --> 00:17:49,600 Speaker 1: Can I say that's like a rotation to industrials, which 371 00:17:49,640 --> 00:17:52,359 Speaker 1: is happening all across one markets, Yeah, across the front. 372 00:17:52,440 --> 00:17:54,000 Speaker 1: That seems to be happening all around the world. 373 00:17:54,040 --> 00:17:55,880 Speaker 2: Just Yeah, there's different acronyms that we like, the one 374 00:17:55,880 --> 00:17:58,240 Speaker 2: from Davos to Detroit. So we think that's what we're 375 00:17:58,280 --> 00:18:01,119 Speaker 2: starting to see and we've been thinking that, not just 376 00:18:01,160 --> 00:18:02,960 Speaker 2: in the last three months, we've been thinking that for 377 00:18:03,480 --> 00:18:04,640 Speaker 2: a considerable period of time. 378 00:18:04,640 --> 00:18:05,200 Speaker 3: If you look. 379 00:18:05,040 --> 00:18:08,880 Speaker 2: At I'm not sure if you're a Louis Vincent gave 380 00:18:09,160 --> 00:18:13,840 Speaker 2: fan but gave co. Yeah, he's got the three type 381 00:18:13,840 --> 00:18:17,760 Speaker 2: of equity bubbles. He speaks about new technology, new geography 382 00:18:17,760 --> 00:18:20,840 Speaker 2: are not enough to go around. We've had new technology 383 00:18:20,960 --> 00:18:23,280 Speaker 2: since the invention of the iPhone, which extended a little 384 00:18:23,280 --> 00:18:25,439 Speaker 2: bit longer than usual AI to sort of a fifteen 385 00:18:25,520 --> 00:18:27,879 Speaker 2: year period. We think that's right for a change. We 386 00:18:27,880 --> 00:18:30,240 Speaker 2: think not enough to go around things like the US 387 00:18:30,320 --> 00:18:33,760 Speaker 2: electrical grid, things like manufacturing capacity in the US. We 388 00:18:33,800 --> 00:18:36,359 Speaker 2: think these are the dominant themes. They're going to take 389 00:18:36,400 --> 00:18:39,399 Speaker 2: over from software, who's been a clear market leader for 390 00:18:39,400 --> 00:18:40,560 Speaker 2: the last fifteen years or so. 391 00:18:41,040 --> 00:18:44,240 Speaker 1: Right, I would have forgive me if I'm wrong, but 392 00:18:44,280 --> 00:18:46,199 Speaker 1: I would have thought there isn't the same kind of 393 00:18:46,200 --> 00:18:49,000 Speaker 1: spectrum of industrials listed industries to choose from, right. There 394 00:18:49,040 --> 00:18:49,520 Speaker 1: used to be. 395 00:18:50,320 --> 00:18:53,600 Speaker 2: Here, well, not things that manufacture, but I mean one 396 00:18:53,600 --> 00:18:55,639 Speaker 2: of our larger holdings is Mative Route, which has a 397 00:18:55,720 --> 00:19:00,240 Speaker 2: huge skilled labor workforce. So skilled labor is in em 398 00:19:00,320 --> 00:19:02,919 Speaker 2: shortage of the time when mining deposits are getting deeper 399 00:19:03,400 --> 00:19:05,760 Speaker 2: and at a time when companies are trying to sweat 400 00:19:05,800 --> 00:19:08,399 Speaker 2: their assets longer. So yeah, there's not a lot of 401 00:19:08,600 --> 00:19:12,800 Speaker 2: companies that produce goods in Australia. It's almost impossible to 402 00:19:12,800 --> 00:19:15,080 Speaker 2: do so with electricity and labor where it is. But 403 00:19:15,160 --> 00:19:17,520 Speaker 2: there's still plenty of companies that we put in that 404 00:19:17,560 --> 00:19:19,800 Speaker 2: industrial basket, and something like a Mata Group would be 405 00:19:19,840 --> 00:19:22,280 Speaker 2: an example of that, or via some which is a 406 00:19:22,480 --> 00:19:24,320 Speaker 2: diversified water services provider. 407 00:19:24,640 --> 00:19:27,040 Speaker 3: But yeah, we're not buying cabrets or mars for instance. 408 00:19:27,080 --> 00:19:30,080 Speaker 1: So mining and mining services are Is that becoming a 409 00:19:30,080 --> 00:19:32,040 Speaker 1: substantial power of the portfolio then. 410 00:19:32,720 --> 00:19:36,119 Speaker 2: Mining services is yeah, yeah, and skilled labor is a 411 00:19:36,200 --> 00:19:38,320 Speaker 2: theme we like, Aging demographics is a theme. 412 00:19:38,359 --> 00:19:40,360 Speaker 3: We like superannuation flows as a theme. 413 00:19:40,400 --> 00:19:43,560 Speaker 2: So we really want to find companies expressed to sectors 414 00:19:44,040 --> 00:19:46,080 Speaker 2: with long term secular tailings. 415 00:19:46,320 --> 00:19:48,040 Speaker 1: Okay, at this point to the show, when I have 416 00:19:48,080 --> 00:19:50,119 Speaker 1: a small CAFs manager on or any manager on, I 417 00:19:50,440 --> 00:19:53,719 Speaker 1: do like them to pick for the listener two stocks 418 00:19:53,760 --> 00:19:55,479 Speaker 1: to have a look at, just to have a look at. 419 00:19:55,520 --> 00:19:58,000 Speaker 1: Maybe you have if you mentioned these, tell us whether 420 00:19:58,040 --> 00:19:59,480 Speaker 1: you have them on the books already. That's all. 421 00:20:00,440 --> 00:20:03,119 Speaker 3: Yeah, Well, Vice an sorry is our biggest holding. 422 00:20:03,359 --> 00:20:04,280 Speaker 1: Tell us about Byson. 423 00:20:04,320 --> 00:20:08,240 Speaker 2: What's that Vice as a diversified water services business. Their 424 00:20:08,520 --> 00:20:11,399 Speaker 2: main business was de watering iron or deposits, so fifty 425 00:20:11,400 --> 00:20:13,960 Speaker 2: percent of iron or deposits in the Pilbra under was it. 426 00:20:13,920 --> 00:20:17,119 Speaker 3: For real and with all them is now. 427 00:20:18,440 --> 00:20:18,640 Speaker 1: So. 428 00:20:19,080 --> 00:20:21,080 Speaker 2: But they also have a water consulting business that they 429 00:20:21,160 --> 00:20:24,520 Speaker 2: bought recently, a wastewater business, so they're diverse going away 430 00:20:24,560 --> 00:20:28,600 Speaker 2: from just being resource based. Where the asymmetry lies in that, 431 00:20:28,680 --> 00:20:31,000 Speaker 2: we think is in Vice on asset management, where they've 432 00:20:31,040 --> 00:20:33,880 Speaker 2: peaked a large amount of land which has a significant 433 00:20:33,880 --> 00:20:36,000 Speaker 2: amount of water on it, and they're looking to sign 434 00:20:36,040 --> 00:20:37,760 Speaker 2: an off take for that water for groups in the 435 00:20:37,800 --> 00:20:40,560 Speaker 2: Pilbra and that may even be end up being a 436 00:20:40,600 --> 00:20:44,000 Speaker 2: government water called potentially who've got a current tender out 437 00:20:44,440 --> 00:20:46,679 Speaker 2: for water and there's not many groups that could service 438 00:20:46,680 --> 00:20:49,520 Speaker 2: that tender. So I think that's really interesting. We love management. 439 00:20:49,720 --> 00:20:51,920 Speaker 2: We think they're a really strong team. We think it's 440 00:20:51,920 --> 00:20:54,040 Speaker 2: the sort of business that can't be disrupted by AI. 441 00:20:54,720 --> 00:20:58,879 Speaker 2: It's a really long term compounder going organically at about twenty percent, 442 00:20:59,000 --> 00:21:02,000 Speaker 2: but through acquisition much stronger than that, and yeah, we 443 00:21:02,040 --> 00:21:03,480 Speaker 2: really like it, so that would be an example of 444 00:21:03,520 --> 00:21:05,119 Speaker 2: the type of business we like. And it's about a 445 00:21:05,160 --> 00:21:08,480 Speaker 2: four hundred and thirty million dollar market cap, so it's 446 00:21:08,520 --> 00:21:13,440 Speaker 2: not demonymous, but really growing strongly and still under owned 447 00:21:13,480 --> 00:21:15,680 Speaker 2: by certainly large institutions. 448 00:21:15,640 --> 00:21:17,800 Speaker 1: With thirty eight stocks are So how often do you 449 00:21:17,880 --> 00:21:18,840 Speaker 1: actually buy in the stock? 450 00:21:20,320 --> 00:21:23,280 Speaker 2: Rarely, so we trade most days to position the portfolio 451 00:21:23,400 --> 00:21:23,920 Speaker 2: how we want. 452 00:21:24,320 --> 00:21:25,359 Speaker 3: So we're really disciplined. 453 00:21:25,600 --> 00:21:28,520 Speaker 2: If we like something the most of this valuation, we 454 00:21:28,560 --> 00:21:30,040 Speaker 2: want it to be our biggest holding, are in our 455 00:21:30,080 --> 00:21:33,240 Speaker 2: top five biggest holdings. It's really annoying for us if 456 00:21:33,240 --> 00:21:35,439 Speaker 2: we really like a stock and we've got one percent 457 00:21:35,480 --> 00:21:37,240 Speaker 2: in it, because if it doubles, it hasn't moved the 458 00:21:37,280 --> 00:21:39,720 Speaker 2: needle for us. So most of our trading has donet 459 00:21:40,080 --> 00:21:42,840 Speaker 2: almost intra portfolio competition. 460 00:21:42,440 --> 00:21:45,880 Speaker 1: Okay, balancing the actual stuff you already have. 461 00:21:46,560 --> 00:21:48,560 Speaker 2: Yeah, so really being fair, and how much do we 462 00:21:48,680 --> 00:21:50,440 Speaker 2: like this? Do we like this more than that at 463 00:21:50,440 --> 00:21:52,359 Speaker 2: this valuation? Well, why isn't it bigger? 464 00:21:52,720 --> 00:21:53,280 Speaker 3: If we do? 465 00:21:53,720 --> 00:21:56,240 Speaker 2: And then a new stock or I feel it enters 466 00:21:56,240 --> 00:21:59,400 Speaker 2: an Exitsu portfolio about once a month. Sometimes there's more 467 00:21:59,400 --> 00:22:01,520 Speaker 2: of a cadence that, but new stocks coming in and 468 00:22:01,560 --> 00:22:04,760 Speaker 2: out are reasonably rare, but we're trading most days to 469 00:22:04,760 --> 00:22:05,679 Speaker 2: get position sizing. 470 00:22:05,720 --> 00:22:05,960 Speaker 3: Right. 471 00:22:06,119 --> 00:22:07,760 Speaker 1: Are you able to tell me your stuff that you've 472 00:22:07,760 --> 00:22:08,720 Speaker 1: exited recently? 473 00:22:11,280 --> 00:22:14,919 Speaker 2: There's a couple we're exiting. I see, then, what are 474 00:22:14,920 --> 00:22:19,600 Speaker 2: we excellent? Oh well, so we exited EL and as 475 00:22:19,640 --> 00:22:24,040 Speaker 2: you want, I actually really like EOL. So EL what 476 00:22:24,080 --> 00:22:24,280 Speaker 2: was it? 477 00:22:24,520 --> 00:22:26,879 Speaker 3: Why? Why do we like it? 478 00:22:27,000 --> 00:22:27,119 Speaker 1: One? 479 00:22:29,400 --> 00:22:30,240 Speaker 3: We just think. 480 00:22:32,280 --> 00:22:34,920 Speaker 2: Evaluations are reasonably high, not as far as some other 481 00:22:34,920 --> 00:22:37,879 Speaker 2: SaaS businesses. We just think the selldown in SAS has 482 00:22:37,920 --> 00:22:40,240 Speaker 2: a long way to go, not because companies like zero 483 00:22:40,880 --> 00:22:44,560 Speaker 2: don't have a viable business going forward, but because investors 484 00:22:44,560 --> 00:22:46,600 Speaker 2: no longer want to pay fifty times eighty times one 485 00:22:46,640 --> 00:22:47,600 Speaker 2: hundred times earnings. 486 00:22:47,840 --> 00:22:50,120 Speaker 1: The place got ahead of the business, basically. 487 00:22:49,920 --> 00:22:50,480 Speaker 3: That's right. 488 00:22:50,560 --> 00:22:53,040 Speaker 2: So AOL we thought would get infected with that, we 489 00:22:53,119 --> 00:22:56,320 Speaker 2: really like it. We think management a grade. It was 490 00:22:56,359 --> 00:22:59,600 Speaker 2: more just where can we reduce exposure to sort of 491 00:22:59,600 --> 00:23:04,160 Speaker 2: an infection ancestral aided stocks, which we think is still 492 00:23:04,160 --> 00:23:05,440 Speaker 2: got a while to play out. 493 00:23:05,480 --> 00:23:08,240 Speaker 3: So it was more of a right yeah. 494 00:23:07,920 --> 00:23:12,040 Speaker 1: Which plays back into your spring towards the traditional and 495 00:23:12,359 --> 00:23:16,840 Speaker 1: from the intangible. Heroes of last year being the software 496 00:23:16,960 --> 00:23:19,600 Speaker 1: champions okay, very good. Stick with us. We're going to 497 00:23:19,600 --> 00:23:29,200 Speaker 1: ask a couple of questions from listeners back in a moment. Hello, 498 00:23:29,280 --> 00:23:32,120 Speaker 1: Welcome back to the Australian's Money Puzzle podcast. I'm James 499 00:23:32,200 --> 00:23:35,240 Speaker 1: Kirby here with Chris Judd of the Sarahity Macro Fund. 500 00:23:35,240 --> 00:23:37,640 Speaker 1: That is a fund which specializes so far in small 501 00:23:37,680 --> 00:23:40,719 Speaker 1: cap investing. It's run by Chris Judd, who you may 502 00:23:40,800 --> 00:23:43,840 Speaker 1: or may not know as a former footy player of 503 00:23:43,960 --> 00:23:47,679 Speaker 1: great renown. Okay, Patrick asks, I think your episode on 504 00:23:47,880 --> 00:23:51,679 Speaker 1: gold had poor advice. Gold is not an investment. It 505 00:23:51,720 --> 00:23:56,000 Speaker 1: doesn't give a return. And then he puts it against 506 00:23:56,040 --> 00:23:59,440 Speaker 1: shares and he says the shares have additional tax advantages 507 00:23:59,520 --> 00:24:02,520 Speaker 1: and ranking credits and dividends and there's so much better. 508 00:24:03,200 --> 00:24:04,800 Speaker 1: I don't know about that. I love it. I think 509 00:24:04,800 --> 00:24:07,159 Speaker 1: gold's damn good and it's been good for years. What 510 00:24:07,200 --> 00:24:08,879 Speaker 1: do you think, Chris? None of this is adviced by 511 00:24:08,880 --> 00:24:09,920 Speaker 1: the way information only. 512 00:24:11,000 --> 00:24:11,959 Speaker 3: Look, we like gold. 513 00:24:12,200 --> 00:24:14,520 Speaker 2: One thing we do try and avoid is getting religious 514 00:24:14,520 --> 00:24:17,200 Speaker 2: about investments. And we see that a lot, and people 515 00:24:17,280 --> 00:24:20,240 Speaker 2: get whether it's gold or stock or a big cooin 516 00:24:20,320 --> 00:24:23,240 Speaker 2: or property sort of it's easy to come almost a 517 00:24:23,240 --> 00:24:25,600 Speaker 2: religious seal about it and try and defend that position. 518 00:24:25,880 --> 00:24:28,000 Speaker 2: To argue goal has been a bad investment when it's 519 00:24:28,040 --> 00:24:30,680 Speaker 2: got a multi thousand year track record and there's boom 520 00:24:30,720 --> 00:24:33,760 Speaker 2: since the early two thousands, seems an incredibly strange time 521 00:24:33,800 --> 00:24:35,280 Speaker 2: to hit you wagging in that bed. 522 00:24:35,400 --> 00:24:37,119 Speaker 3: But yeah, we like gold. 523 00:24:37,400 --> 00:24:39,840 Speaker 1: How many gold manterers did you say you have bo. 524 00:24:39,920 --> 00:24:43,200 Speaker 2: We've got four different gold stocks. We've got about fourteen 525 00:24:43,240 --> 00:24:46,239 Speaker 2: percent of our fund third end to percent of our 526 00:24:46,240 --> 00:24:47,320 Speaker 2: funding gold stocks. 527 00:24:47,800 --> 00:24:50,040 Speaker 1: Was that the case when you started in the early days. 528 00:24:51,119 --> 00:24:53,720 Speaker 2: No, that's great. I mean we've it's been a little 529 00:24:53,720 --> 00:24:56,400 Speaker 2: bit higher. There are times that's really high for us. 530 00:24:56,760 --> 00:24:59,399 Speaker 2: But yeah, we think we just think it's got a 531 00:24:59,440 --> 00:25:01,000 Speaker 2: long way to play. I think the bubble that didn't 532 00:25:01,000 --> 00:25:04,399 Speaker 2: get spoken about much was really you government bonds. You know, 533 00:25:04,440 --> 00:25:07,000 Speaker 2: you had eighteen trillion dollars worth of negative viewing debt 534 00:25:07,119 --> 00:25:10,760 Speaker 2: in COVID. That was the bubble to us, not big coined, 535 00:25:10,760 --> 00:25:13,720 Speaker 2: not gold. They're sort of symptoms of that bubble, aren't minding. 536 00:25:13,760 --> 00:25:15,119 Speaker 2: And we think if that's the case, it's got a 537 00:25:15,119 --> 00:25:15,639 Speaker 2: long winning go. 538 00:25:16,160 --> 00:25:19,160 Speaker 1: And the gold to some extent fits into your hard assets. 539 00:25:19,600 --> 00:25:21,800 Speaker 3: Well, both heard adds to your political risks like you had. 540 00:25:21,840 --> 00:25:24,600 Speaker 2: Russia had three hundred billion dollars of effects reserve sanction 541 00:25:24,680 --> 00:25:25,719 Speaker 2: when they invaded Ukraine. 542 00:25:26,320 --> 00:25:27,520 Speaker 3: Why any sovereign. 543 00:25:27,280 --> 00:25:29,120 Speaker 1: Nice and they said, we'll never let that happen again, 544 00:25:29,160 --> 00:25:30,080 Speaker 1: We'll have gold next time. 545 00:25:30,080 --> 00:25:30,560 Speaker 3: Well, that's right. 546 00:25:30,560 --> 00:25:33,560 Speaker 2: Why would any sovereign nation store their surplus reserves in 547 00:25:33,760 --> 00:25:36,400 Speaker 2: an asset that can be sanctioned, even if he's paying 548 00:25:36,400 --> 00:25:39,840 Speaker 2: a yield of you know, or four percent? So yeah, 549 00:25:39,840 --> 00:25:42,520 Speaker 2: I think that trends long term and secure in nature. 550 00:25:42,840 --> 00:25:46,119 Speaker 1: Okay, Patrick, I hope that was useful to you. I 551 00:25:46,240 --> 00:25:49,080 Speaker 1: see your point. Of course, doesn't pay income, and there 552 00:25:49,119 --> 00:25:53,520 Speaker 1: are long periods, long long periods in historical cycles for 553 00:25:53,680 --> 00:25:57,280 Speaker 1: gold is useless as an investment. But in the overall 554 00:25:57,320 --> 00:25:59,520 Speaker 1: scheme of things long term it has been good and 555 00:25:59,560 --> 00:26:02,199 Speaker 1: more than that, it would seem to be in a 556 00:26:02,240 --> 00:26:07,680 Speaker 1: secular trend just now. And I don't think the outbreak 557 00:26:07,720 --> 00:26:09,960 Speaker 1: of hostilities in the Middle East will do with any 558 00:26:10,040 --> 00:26:14,720 Speaker 1: damage at all in terms of it's a price trajectory. Okay, Amanda, 559 00:26:15,160 --> 00:26:17,119 Speaker 1: I read your feature. This is a feature in the 560 00:26:17,160 --> 00:26:20,320 Speaker 1: Australian Chris which was actually by me who which said 561 00:26:21,119 --> 00:26:23,320 Speaker 1: I read your feature about giving up on small cap 562 00:26:23,320 --> 00:26:25,720 Speaker 1: stocks in The Australian. You should never give up on 563 00:26:25,800 --> 00:26:29,000 Speaker 1: any chance to firstify your investments. I think you made 564 00:26:29,000 --> 00:26:31,520 Speaker 1: a mistake. That was about mis saying I'm giving up 565 00:26:31,520 --> 00:26:34,160 Speaker 1: on buying small caps one by one individually because I've 566 00:26:34,160 --> 00:26:37,280 Speaker 1: been burnt too many times, Chris, and I was actually 567 00:26:37,400 --> 00:26:42,119 Speaker 1: moving into ETFs and funds, And I don't need to 568 00:26:42,160 --> 00:26:43,560 Speaker 1: ask you what you think of that, because you're a 569 00:26:43,560 --> 00:26:46,080 Speaker 1: smart cap far manager, so I'm sure you agree. Unless 570 00:26:46,080 --> 00:26:46,520 Speaker 1: I'm wrong. 571 00:26:47,480 --> 00:26:49,239 Speaker 2: I agree that if you don't have time to make 572 00:26:49,320 --> 00:26:52,840 Speaker 2: management a full time employee or business owner, I don't 573 00:26:52,840 --> 00:26:55,000 Speaker 2: think it is wise to invest in individual small caps. 574 00:26:55,000 --> 00:26:56,960 Speaker 2: I do agree with that. But we do have the 575 00:26:56,960 --> 00:26:59,800 Speaker 2: time to make management and do the work, so it 576 00:27:00,040 --> 00:27:00,920 Speaker 2: makes sense for us. 577 00:27:01,000 --> 00:27:02,320 Speaker 3: But yeah, a. 578 00:27:02,400 --> 00:27:05,040 Speaker 1: Peculiar question, but it just struck me. You mentioned about 579 00:27:05,400 --> 00:27:08,800 Speaker 1: people and judging them and you know, man watching basically, 580 00:27:08,840 --> 00:27:10,439 Speaker 1: whether people put their hand up to their chin or 581 00:27:10,440 --> 00:27:12,400 Speaker 1: whatever when they're telling you they're going to Dublin size 582 00:27:12,440 --> 00:27:14,880 Speaker 1: next year. Do you need to meet them a personally, 583 00:27:14,920 --> 00:27:15,959 Speaker 1: happy to meet them online. 584 00:27:17,080 --> 00:27:19,840 Speaker 3: We're happy to meet them online, but a person is preferable. 585 00:27:20,040 --> 00:27:22,720 Speaker 1: Okay, okay, very good. And of the number of stocks 586 00:27:22,720 --> 00:27:24,760 Speaker 1: you have, those thirty eighth stocks roughly, how many would 587 00:27:24,760 --> 00:27:26,879 Speaker 1: you reckon you've actually had a face to face with. 588 00:27:28,640 --> 00:27:30,480 Speaker 3: I don't think there's any Australian ones. 589 00:27:31,000 --> 00:27:35,240 Speaker 1: We haven't you haven't, Okay, right, boy, I hang on. 590 00:27:35,400 --> 00:27:39,800 Speaker 2: Say we are next Gen the uranium developer with a 591 00:27:39,920 --> 00:27:45,160 Speaker 2: Canadian deposit. We haven't met the CEO, but we've heard 592 00:27:45,200 --> 00:27:49,680 Speaker 2: him present several times online and we've met other people 593 00:27:49,680 --> 00:27:52,359 Speaker 2: from the company. But I haven't actually met Lee. I 594 00:27:52,440 --> 00:27:55,000 Speaker 2: don't think, but yeah, I think all the others we've met. 595 00:27:55,560 --> 00:27:55,960 Speaker 3: Yeah. 596 00:27:56,040 --> 00:27:58,000 Speaker 1: It strikes me how far away you are from a 597 00:27:58,080 --> 00:28:00,560 Speaker 1: pund manager I most recently who taught me that they 598 00:28:00,560 --> 00:28:04,640 Speaker 1: have an AI whatever app and they tip for all 599 00:28:04,680 --> 00:28:07,520 Speaker 1: the agms. It puts all the agms together and it 600 00:28:07,520 --> 00:28:09,640 Speaker 1: gives them a little bulletin on what was said, which 601 00:28:09,680 --> 00:28:12,480 Speaker 1: means to never even look online at the agms that 602 00:28:12,560 --> 00:28:14,840 Speaker 1: the people they're investing in, which is so far away 603 00:28:14,880 --> 00:28:18,680 Speaker 1: from your much more sort of boots on the ground approach. Okay. 604 00:28:18,760 --> 00:28:23,360 Speaker 1: Final question from Trevor regarding the popularity of ETFs. Something 605 00:28:23,640 --> 00:28:26,960 Speaker 1: that I think is covered very lightly is the dealing 606 00:28:26,960 --> 00:28:29,959 Speaker 1: of capitive gains. The ETFs have to distribute all their 607 00:28:30,000 --> 00:28:32,280 Speaker 1: capital games each year, So a high income earner has 608 00:28:32,320 --> 00:28:35,800 Speaker 1: little control on when to realize their capitive games, eg. 609 00:28:36,080 --> 00:28:38,280 Speaker 1: Even after they retire. But that would be the same 610 00:28:38,320 --> 00:28:40,240 Speaker 1: with a fund, wouldn't it. I mean you buy and 611 00:28:40,280 --> 00:28:42,520 Speaker 1: sell and I have to take your final outcome of 612 00:28:42,600 --> 00:28:44,520 Speaker 1: the year. I can't say, oh damn, he went and 613 00:28:44,560 --> 00:28:47,160 Speaker 1: sold that too early or whatever. That's just the nature 614 00:28:47,200 --> 00:28:48,040 Speaker 1: of the game, isn't it. 615 00:28:48,320 --> 00:28:50,440 Speaker 2: Yeah, we don't pay tax in the fund. It flows 616 00:28:50,440 --> 00:28:52,880 Speaker 2: through to the un holder. The holder doesn't know what 617 00:28:52,920 --> 00:28:55,320 Speaker 2: the realized gains are going to be each year, but 618 00:28:55,400 --> 00:28:58,560 Speaker 2: they do get distributed all those realized gains to pay 619 00:28:58,720 --> 00:29:02,480 Speaker 2: tax and have liftover. Should there be realized games obviously, 620 00:29:02,880 --> 00:29:06,720 Speaker 2: But that's right. Yeah, it's different. Yeah, that's the deal 621 00:29:06,920 --> 00:29:11,320 Speaker 2: because everyone's tax everyone's unique tax situation, so it's impossible 622 00:29:11,320 --> 00:29:13,480 Speaker 2: for us, when you're dealing with you know, one hundred 623 00:29:13,560 --> 00:29:16,040 Speaker 2: or different investors to try and plan for that. 624 00:29:16,160 --> 00:29:17,320 Speaker 3: So that's a fair point. 625 00:29:17,600 --> 00:29:21,160 Speaker 1: Okay, thank you for that, Trevor, and thank you very much, Chris. 626 00:29:21,280 --> 00:29:23,840 Speaker 1: I'm in the I operate this podcast here in the 627 00:29:23,960 --> 00:29:26,720 Speaker 1: harolsun building. I mentioned this because when I went down 628 00:29:26,760 --> 00:29:30,080 Speaker 1: at the brick, they were having their morning tea footy 629 00:29:30,440 --> 00:29:33,560 Speaker 1: season whatever get together they were wearing. There are various 630 00:29:33,600 --> 00:29:35,680 Speaker 1: scarfs and everything, so I mean I have to ask 631 00:29:35,760 --> 00:29:38,560 Speaker 1: you for the season just starting. Who do you think 632 00:29:38,640 --> 00:29:41,360 Speaker 1: might win this year at the round final? 633 00:29:42,400 --> 00:29:46,400 Speaker 2: I think gold Coast So I take my stock picking 634 00:29:46,520 --> 00:29:50,560 Speaker 2: very seriously. I'm actually a terrible tips of football and 635 00:29:51,240 --> 00:29:53,640 Speaker 2: given my history, people paying more respect to my tips 636 00:29:53,680 --> 00:29:55,800 Speaker 2: than they should. But I think gold Coast is going 637 00:29:55,880 --> 00:29:58,400 Speaker 2: to win the Grand Final. But that should mean nothing. 638 00:29:59,440 --> 00:30:01,280 Speaker 1: It was a good your answer anyway, tell you that 639 00:30:01,400 --> 00:30:03,880 Speaker 1: you didn't look around. Wish it was good? Okay, very 640 00:30:03,880 --> 00:30:07,360 Speaker 1: good Chris John the Sarahity macro Fund. Very nice to 641 00:30:07,360 --> 00:30:10,240 Speaker 1: have you on the show. Best of look. Thanks, thanks, 642 00:30:10,560 --> 00:30:12,960 Speaker 1: thank you Chris, and thanks for listening. Folks. Keep the 643 00:30:13,160 --> 00:30:16,360 Speaker 1: emails coming The Money Puzzle at the Australian dot com 644 00:30:16,400 --> 00:30:19,800 Speaker 1: dot Au. Today's show was produced by Leah sammacdu I 645 00:30:19,920 --> 00:30:20,640 Speaker 1: Talk to you soon.